BOFIT Viikkokatsaus / BOFIT Weekly 2016/50

Last Sunday (Dec. 11), China celebrated its 15th anniversary since joining the World Trade Organization. In China’s view, other countries agreed during its accession negotiations that it would be treated initially as a non-market economy and would be granted market-economy status automatically after 15 year of membership. The largest advanced economies, i.e. the US, EU and Japan, however, have yet to grant China such status. The US, in particular, has stressed China’s failure to make sufficient progress in market reforms. On Monday (Dec. 12), China filed a complaint to WTO and announced its request to engage consultations with the US and EU to resolve the matter. If the parties fail to agree, the dispute would move to the WTO for resolution. If so, the decision would likely be handed down in spring 2018. The parties could still resolve the dispute among themselves earlier.

The granting of market-economy status to China is largely a political gesture to recognise the country’s progress in market-economy reforms. In practical terms, market-economy status means little as it applies only to anti-dumping measures. It is easier to impose anti-dumping measures on countries with non-market-economy status. Japan and the US are keeping their anti-dumping procedures unchanged, while the EU is changing its practices so that market-economy status will no longer have any affect how import duties are imposed.